GOVERNMENT COLLEGE OF ENGINEERING AND

LEATHER TECHNOLOGY

NAME: LOKASIS GHORAI

SEM: 6TH

SUBJECT: PRINCIPLES OF MANAGEMENT (PROJECT)

STREAM : COMPUTER SCIENCE

ROLL NO: 112001126046

TOPIC: DECISION MAKING

 Decision Making
Decision making is an integral part of every aspect of life. This also applies to
organizations. It is one of the key factors that pave the way for its success or failure.
Every manager is required to execute decisions at various levels of the management
cycle beginning from planning to control. It is the effectiveness and quality of those
decisions that determine how successful a manager is.

Without decision making, different managerial functions such as planning, organizing,

directing, controlling, and staffing cannot be conducted. Decision making is a
cumulative and consultative process, and should support organizational growth.

The main function of every management is making the right decisions and seeing them
through to their logical end through execution. Every management decision also affects
employee morale and performance, ultimately influencing the overall business
performance. The importance of decision making in management is immense, as the
business policy and strategies adopted ultimately affects the company's output and
performance.

Types of Decisions
Decision making and problem solving is a continuous process of analyzing
and considering various alternatives in various situations, choosing the most
appropriate course of action and following them up with the necessary
actions.

There are two basic types of decisions −

 Programmed Decisions

 Non-programmed Decisions
Programmed Decisions
Programmed decisions are those that are made using standard operating
procedures or other well-defined methods. They are situations that are
routine and occur frequently.
Organizations come up with specific ways to handle them. Programmed
decisions are effective for day-to-day issues such as requests for leave or
permissions by employees. Once the decision is taken, the program specifies
processes or procedures to be followed when similar situation arises. Creating
such programed routines lead to the formulation of rules, procedures and
policies, which becomes a standard in the organization.
Non-programmed Decisions
Non-programmed decisions are unique and one-shot decisions. They are not
as structured as programmed decisions and are usually tackled through
judgment and creativity.

They are innovative in essence, as newly created or unexpected problems are

settled through unconventional and novel solutions.

Decisions are typically made under one of three conditions −

 Certainty

 Risk and

 Uncertainty

These conditions are based on the amount of knowledge the decision maker
has regarding the final outcome of the decision. The manager's decision
depends on a number of factors, like the manager's knowledge, experience,
understanding and intuition.

Certainty
 Decisions are made under conditions of certainty when the manager has enough
information to know the outcome of the decision before it is made.

 The manager knows the available alternatives as well as the conditions and
consequences of those actions.

 There is little ambiguity and hence relatively low possibility of making a bad
decision.
Risk
 Most managerial decisions are made under conditions of risk.

 Decisions are taken in risk when the manager has some information leading to
the decision but does not know everything and is unsure or unaware of the
consequences.

Under conditions of risk, the manager may find it helpful to use probability
estimates. This is where the manager’s experience and/or intelligence is of
great help.
Uncertainty

 Decisions are made under uncertainty when the probabilities of the results are
unknown.

 There is no awareness of all the alternatives and also the outcomes, even for the
known alternatives.

Under such conditions managers need to make certain assumptions about

the situation in order to provide a reasonable framework for decision making.
Intuition, judgment, and experience always play a major role in the decision
making process under conditions of uncertainty.

The decision-making process involves the following steps −

 Define the problem

 Identify limiting factors

 Develop potential alternatives

 Analyze and select the best alternatives

 Implement the decision

Define the Problem
The first step in the process of decision making is the recognition or
identification of the problem, and recognizing that a decision needs to be
taken.

It is important to accurately define the problem. Managers can do this by

identifying the problem separately from its symptoms. Studying the
symptoms helps getting closer to the root cause of the problem.

Identify Limiting Factors

In order to choose the best alternative and make a decision every manager
needs to have the ideal resources − information, time, personnel, equipment,
and supplies. But this is an ideal situation and may not always be possible.

A limiting factor is something that stands in the way of accomplishing a

desired objective.
Develop Potential Alternatives
Recognizing the limiting factor in a given situation makes it possible to narrow
down the search for alternatives and make the best decision possible with
the information, resources, and time available.

Some methods for developing alternatives are −

 Brainstorming, where a group works together to generate ideas and alternative

solutions.
  Nominal group technique is a method that involves the use of a highly
structured meeting, complete with an agenda, and restricts discussion or
interpersonal communication during the decision-making process.

 Delphi technique where the participants do not meet, but a group leader uses
written questionnaires to conduct the decision making.

Analyze the Alternatives

This is an important stage in the decision-making process and perhaps the
toughest. Managers must identify the merits and demerits of each alternative
and weigh them in light of various situations before making a final decision.

Evaluating the alternatives can be done in numerous ways. Here are a few
possibilities −

 Qualitative and quantitative measurements

 Perform a cost‐effectiveness analysis for each alternative

 Marginal analysis
Selecting Alternatives
Once the alternatives are analyzed and evaluated, the manager has to choose
the best one. The manager needs to choose the alternative that gives the
most advantage while meeting all the required criteria. Sometimes the choice
is simple with obvious benefits, at times the optimal solution is a combination
of several alternatives. At times when the best alternative may not be
obvious, the manager uses probability estimates, research and analysis aided
by his experience and judgment.

Evaluating Decision Effectiveness

The job of the managers does not end with making decisions. They are also responsible
to get favorable results from the decision taken and implemented.

The effectiveness of a decision can be understood through a systematic and scientific

evaluation system that provides feedback on how well the decision is being
implemented, what the results have been, and what amendments and adjustments have
been made to get the intended results.
Decision making style of managers depend greatly on their personality and approach towards
problem solving. Every leader or manager has his own individualistic style augmented by his
experience, background, and abilities.
Directive or Autocratic
Decision Making
Analytical Decision Making
Behavioral Decision Making
Conceptual Decision Making
Managers who follow this style assess few
alternatives and consider limited information
while taking any decision.
They do not find it important to consult with
others or seek information in any form and use
their logic and idea while taking decisions.
Managers using analytic decision making style
would like to have more information and
consider more alternatives before coming to a
conclusion.
They seek relevant information from their
sources and consider factual and detailed
information before taking any decision. Such
managers are careful decision makers as they
have the ability to adapt or cope with unique
situations.
Leaders who follow this model believe in
participative management and consider the
achievement of subordinates and always take
suggestions from them.
They try to get inputs from subordinates through
meetings and discussions. They try to
avoid/resolve conflicts as acceptance by others
is important to them.
Managers using conceptual decision making
style are intuitive in their thinking and have high
tolerance for ambiguity.
 They look at many alternatives and focus on long
run outcomes.

Decision making is a very important and complex process. In order to aid decision
makers make the right choice, quantitative techniques are used that improve the overall
quality of decision making.
Following are some of the commonly used techniques −

Decision Trees
Decision Trees are tools that help choose between several courses of action or
alternatives. They are −
Represented as tree-shaped diagram used to determine a course of action or show a
statistical probability.
Each branch of the decision tree represents a possible decision or occurrence.
The tree structure shows how one choice leads to the next, and the use of branches
indicates that each option is mutually exclusive.
A decision tree can be used by a manager to graphically represent which actions could
be taken and how these actions relate to future events.

Delphi Technique
Delphi Technique is a method used to estimate the likelihood and outcome of future
events. It is unique because −
It is a group process using written responses to a series of questionnaires instead of
physically bringing individuals together to make a decision.
Individuals are required to respond to a set of multiple questionnaires, with each
subsequent questionnaire built from the information gathered in the previous one.
The process ends when the group reaches a consensus.
The responses can be kept anonymous if required.

Payback Analysis
Payback analysis is a technique generally used in financial management.
It refers to the period of time required to recoup the funds expended in an investment, or
to reach the break-even point.
It is generally used to evaluate capital-purchasing alternatives.
Alternatives are ranked according to the time each takes to pay back its initial cost.
The strategy is to choose the alternative that has the quickest payback of the initial cost.

Simulations
Simulation is a technique that attempts to replace and amplify real experiences with
guided techniques.
It is a widely used technique in operations research.
It models the behavior of individual elements within a given system.
Methods generally used in simulation are random sampling to generate realistic
variability.
The overall behavior of the system emerges from the interactions between the
elements.
Widely used application areas of the simulation technique are - logistics and supply
chain, service and operations management, business process improvement, health and
social care information system, environment, etc.